IRS Tax Tip 2018-146, September 19, 2018
The IRS is alerting certain veterans that they may be due a credit or refund. This is a result of the Combat-Injured Veterans Tax Fairness Act passed in 2016. It affects veterans who received disability severance payments after January 17, 1991, and included that payment as income.
Here is what these veterans should know:
- Veterans who included their disability severance payments as income should file Form 1040X, Amended U.S. Individual Income Tax Return.
- The veterans will file Form 1040X to claim a credit or refund of the overpayment attributable to the disability severance payment.
- These veterans received a one-time, lump-sum disability severance payment when they separated from their military service.
- Most of these veterans will have recently received a letter from the Department of Defense with information explaining how they should claim the related tax refunds.
- Veterans can submit a claim based on the actual amount of their disability severance payment. However, there is a simplified method where veterans can instead choose to claim a standard refund amount. This amount is based on the calendar year in which they received the severance payment:
- $1,750 for tax years 1991 – 2005
- $2,400 for tax years 2006 – 2010
- $3,200 for tax years 2011 – 2016
- Claiming the standard refund amount is the easiest way for veterans to claim a refund, because they do not need to access the original tax return from the year of their lump-sum disability severance payment.
- The veteran must mail the claim generally by the later of these dates:
- One year from the date of the Department of Defense notice
- Three years after the due date for filing the original return for the year the disability severance payment was made
- Two years after tax was paid for the year the disability severance payment was made.
- Veterans eligible for a refund who did not get a letter from DoD should visit the Defense Finance and Accounting Service and IRS’s Combat-injured disabled veterans page for more information on how to file a claim.
- FAQs: Filing Amended Returns for Combat-Injured Disabled Veterans
- Publication 3, Armed Forces’ Tax Guide
- Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer
- Information for Veterans
- Publication 525, Taxable and Non-Taxable Income
- Publication 907, Tax Highlights for Persons with Disabilities
- IRS News Release: IR-2018-148, July 11, 2018